XP, Inc. Q3 FY2024 earnings call

• Net new money: Recorded BRL31 billion in net new money for the quarter, a 124% growth year-over-year excluding Modal acquisition, with BRL25 billion from retail. - Advisor count: Total number of advisors reached 18,400, growing 9% year-over-year. - Client base: Active client base marked BRL4.7 million, increasing 6% year-over-year. - Financial metrics: ROTE was 28.4%, an increase of 258 bps year-over-year. EPS was BRL2.18 per share, an all-time high. - Dividends and buyback: Announced an extra payout of BRL3 billion, targeting more than 50% payout until 2026. - Retail investments: Product platform is complete, multichannel distribution evolves, offers differentiated services, and cross-sell initiatives are implemented with positive results in areas like credit card and life insurance. - Corporate and wholesale: DCM volume was high, secondary trading market share over 50%, corporate securities grew 79% year-over-year, etc.

In the third quarter of 2024, gross revenues grew 17% year-over-year over nine months, reaching BRL13.3 billion. EBT posted 25% growth year-over-year, delivering BRL3.7 billion. Net income reached BRL3.3 billion, expanding 17% year-over-year, with the quarter's net income almost BRL1.2 billion and a 27.5% margin. Retail revenue posted BRL3,494 million, a 15% growth over nine months 2024 and 10% growth year-over-year, with fixed income being a highlight, growing 56% over nine months '24 against '23. Corporate and issuer services revenue continued to be an important driver, with BRL552 million in the quarter, representing a 58% growth in nine months '24 and 6% growth year-over-year. SG&A ex incentives reached BRL1.5 billion in the third quarter, with a 35% efficiency ratio, the lowest in history since the IPO.

• Targets for 2026: Aim to have a BIS ratio between 16% and 19% with more than 50% payout in the next couple of years. - Third quarter results: Reaffirm that the execution plan is on track and enhance confidence in delivering the guidance. -下半年预期: Already expecting to deliver better results in second half '24 based on growth levers, cost discipline, and capital allocation.

• Regulatory changes: For example, the change in regulation regarding IFAs which affected the advisor count and classification. - Competition: Large banks advancing in investment platforms and financial advisory, which may impact market share.

Q: About 400 new individuals, relevant amount of those guys that went to the B2C advisor or not?

A: Out of the about 400 employees, 300 adds to B2C, they are advisors due to a new change in regulation where IFAs don't need partners and become regular employees.

Q: Ballpark idea of what level of profitability that XP will have in the long term?

A: Return on capital employed is around 28%, and after delivering the guidance, can expect ROE to be mid-to-high 20s.

Q: Expect in terms of growth for next year and mid-term on RWA?

A: Revenues in issuer service and corporate grew 38% in last 12 months and RWA grew only 30%, indicating gains of scale.

Q: Level of payout in next two years?

A: Can expect 50% or more of net income paid in 2025 and '26.

Q: Impact of RWA and one-off event on other revenue?

A: BIS ratio after dividend and buyback, and one-off event with tender of notes and issue of new bond affected other revenue.

Q: Commission costs and impact of internal salespeople?

A: Hard to see change in COGS quarter-to-quarter as it's a revenue mix issue.

Q: Impact of Expert events on revenues and expenses?

A: Net zero.

Q: Credit revenues change?

A: Due to margin loan operations in broker-dealer and renovation of loans.

Q: Fixed-income retail revenues evolution?

A: Pipeline robust, demand strong, expect growth.

Q: Credit growth outlook?

A: No strategy to pile up credit, will grow in nominal terms as business grows.

Q: Other operating income and equity income?

A: Incentives from distribution channel, reversion in provisions, and equity income affected by seasonality.

Q: Fixed-income take rate breakdown and future behavior?

A: Don't close detailed breakdown, but demand still high, expect similar take rates.

Q: Competition from large banks?

A: Incumbent banks have improvements but guidance not dependent on macro, still confident in position.